CBS stockholders can continue to pursue a lawsuit over the 2019 merger of Viacom and CBS, a Delaware judge has ruled.
Shari Redstone, daughter of late media mogul Sumner Redstone, stands accused of pursuing an unfair merger that created ViacomCBS Inc.
Reuters also reported the ruling has found it is reasonable to explore a claim that former CBS chief Joseph Ianniello “sold” support for the deal to Shari Redstone in exchange for accepting a $125 million severance.
Vice Chancellor Joseph Slights of the Delaware Chancery Court rejected Ianniello and ViacomCBS motions to dismiss on Wednesday.
In today’s ruling, the judge cited a reversal of positions by Redstone and Ianniello as worthy of examination. Iannello originally tried to block the merger, but then changed his mind. His reversal resulted in his severance ballooning from $60 million to $125 million. Redstone has criticized Ianniello’s severance at the lower figure, but then supported it in order to move the merger forward.
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“Both Ianniello’s and Ms. Redstone’s 180-degree change from their prior positions support reasonable inferences that Ianniello’s enriched severance compensation was a quid pro quo and that he violated his fiduciary duty, with the Director Defendants’ help, by giving his loyalty to Ms. Redstone in return,” Slights wrote. “By selling his endorsement for the Merger — which Plaintiffs well plead Ianniello knew was bad for CBS stockholders — Ianniello conceivably violated his fiduciary duty of loyalty.”
Ianniello has disputed this allegation. He has claimed he originally thought that the merger was bad for CBS. But once former CBS CEO Les Moonves was ousted and Ianniello became acting CEO, he changed his mind. He left the company shortly after the ViacomCBS merger was completed.
Some CBS shareholders filed suit last April. Viacom shareholders have a separate suit challenging the merger.
Both groups of stockholders claim Shari Redstone disregarded their interests when she forced the merger.
“At this stage, Ianniello has offered no basis that would allow the Court to deny Plaintiffs the reasonable inference that his contractual incentive to support the allegedly unfair merger overpowered his counteracting incentive as a stockholder to support only a fair merger,” Slights wrote.
Last month, Slights also allowed Viacom shareholders to proceed with a separate suit challenging the merger.
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